Teacher with multiple properties living on the breadline

I have converted the sterling amounts roughly into euro for simplicity:

You have: 44k in short term debt
684K in mortgage debt
Your partners owe an additional 359K on these mortgages
You have 200K equity in your investment properties
You have 100K equity in your home that you are renting out

You face a number of risks:
salary reduction: If your salary reduces on december 9th will you be able to meet your commitments? What if it reduces again next year?

Interest rates in UK and eurozone are at historic lows (.5 and 1%). Each 1% rise will cost you 6.8K annually. You don't have 6.8K to spare

falling rents If rents fall by 10%, how will you possibly meet your obligations?

partner risk if one of your two partners stops making mortgage payments for any reason, then you may be liable for that partners debt. What would you do then as you can't afford to cover for them?

neg equity risk Your valuations may be over optimistic. If prices fall 15% for two years running you will be in negative equity and unable to sell up and escape. You have no PPR so all of your properties are easily repossessed.

You seem to have a lot of avenues heading towards catastrophic financial failure. You are living on a knife edge with no room for a minor mishap.

You have a salary of 60k and you live in a rented room and have no car. You are massively exposed in a single asset class. Your investment is geared to multiply risk and return. What investments are you making in your own education and personal development?

Answer: sell up. pay off debts. put money in safe boring investment that make a +ve return. Buy a car. Live a little. Learn something new.

You will need to find out how to extricate yourself from your partner arrangements. Have you even got legal agreements to cover your exit strategy? If in negative equity, there is no exit of course.
 
Also hasn't been mentioned what will happen if you stable tenants leave one or more of the properties - it looks like you don't have any savings to cover any shortfall.

Back of the envelope figures say you can sell all your properties and have 225,000 euro + 57,500 GBP profit (subject to CGT) - that's a no brainer to anyone. (this assumes they are accurately valued though). This profit would be enough to buy a decent house for cash in most parts of the country.

For an individual, you have an extensive property portfolio which you are struggling to maintain. It's madness for an individual to have all their investment in one asset class like this.
 
sell. you are way over exposed to one asset. You have debts of €650 on a salary of €60k. You are really on the edge each month, a drop in rental (very likely imho) and/or an increase in ECB are you are in trouble.

Can you fill in a few blanks? What are the lengths of each mortgage? Are all trackers to the ECB and finally Investment property #1 has a mortgage of 180k which you owe 60% but your monthly costs of €1000 seem very high? Do you have a very short mortgage on that?

EDIT: Are the incomings and outgoings for the properties you partly own adjusted to reflect that fact? ie invest prop #4 : is the 450 your half of the rent or to full rent
 
I don't believe you when you say you have your bases covered with regards to tax.

Nikephorus said:
Investment Property #1, Value €280,000 (own 60% of this with business partner A), Mortgage €180,000, Tracker (+0.85%) - Monthly Payments (incl bills etc) = €1000, Rent = €950, VERY STABLE tenants.
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You don't pay the bills unless you're trying to hide the income.

Also, only 75% of interest can now be offset against rental income. The (your) Unions are agitating for this to be reduced in the budget. The NPPR property tax of 200 Euro is only going in 1 direction.

With a moving tax basis no investor has their bases covered, even if they are currently compliant.
 
Also missing are building and contents insurance on 5 houses, depreciation of furniture, fixtures and fittings, cost of day-to-day property management, vacant periods, cost of finding new tenants.
 
I keep a very close eye on interest rates in the near future. They can only go one way and that's up.
 
I don't understand your philosophy.

You are renting a room from a friend because it's "more economical less hassle than living in my own property and letting a room".

So - you have 4 investment properties. Which are providing you with stress, worry, mounting debts, etc.

You are 33yrs of age, yet you don't even have the luxury of living in your own home because you need to fund your 'investment'.

Are you hoping to amass a vast fortune for something in the future?

Life is for living NOW not some time in 20yrs when all your ships come in.
 
Nikephorus said:
I would like to tough it out up there, as I would like to build up a portfolio of investment properties over time, both in the UK and Ireland.
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Isn't that whats life is all about, buying property & building up a property portifolio. Now is the best time to invest further.

Do you plan to marry your business partner in investment prop. No. 2. Will he/she ever plan to get married?

What do you mean by stable tenants? In the current climate stable tenants can easily turn into stale tenants.

I would have a word with your mathematics teacher in your school in connection with say a further 10% drop in your asset prices, an increase of 1% on all your variable interest rates & a further 10% drop in your rent intake.

And please, do not turn round & tell us you are the mathematics teacher!
 
You are waaaay overexposed to one asset class.
This is a highly dangerous way to achieve the goals you have set yourself.

You have very little room to work with if things start to go wrong, be it with one of the partners having financial issues, of unforseen issues that you have not encountered to date, interest rates rising and what not.

You have some highly leveraged bets made that could sour very easily, if circumstances do not go your way.

While I would hope that the valuations you have set for your portfolios are true, assuming that current asking prices are the same thing as selling prices is a big mistake.

If you liquidate the properties as the rates you have mentioned at, you would be 300K up. So you made a bet, could be up 300k, yet you still want to stay at the table and continue gambling?

Not a very wise move IMHO.

You're not frank fahey by any chance? :)

Reduce your property exposure and use whatever gains you have to build a more diversified portfolio of investment vehicles to reduce the huge risk levels that you currently maintain.

I think you should be thankful thus far that you are not financially wiped out, and make a bee line for the door.

Sell what you can and use any profit to pay off the mortgage on the ones you own on your own.
 
Let me focus on the other issue not your death(debt) but your life which seems to me to be passing you by. You have a nice house but you cant afford to live in it you have a good salary but are so broke you cant enjoy it. You are young fit and healthy and what are your hobbies and what are you doing in your spare time? In 20 more short years you will be on the slippery slope down hill and most of us have the satisfaction that we have made the most of what we had but will you have that ! Life is for living now. Do you want to die and leave all you have accumalated to some one else to enjoy. I hope I will have spent every penny and gone everywhere I wanted to go and fullfilled all my dreams and I have children to leave my money to but I hope to spend as much as possible first.
 
For me one of the best things about being a teacher would seem to be the long holidays, it seems from your post that while you have 4 properties you've no quality of life and certainly no money to use those long holidays for anything except worrying about your 'investments', pointless.
 
Madness ....

you can't afford your property portfolio .... sell. sell. sell!

Keep one .... live in it and live life!
 
dereko1969 said:
For me one of the best things about being a teacher would seem to be the long holidays, it seems from your post that while you have 4 properties you've no quality of life and certainly no money to use those long holidays for anything except worrying about your 'investments', pointless.
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I would go so far as to say OP has been blinded by a greed and at this point in time I cannot understand how he thinks there can be anyone in the world never mind the country who offer him encouragement to stay on the path his is on. its truly astonishing.
Honestly OP - get yourself a life - cut a few losses -
 
[FONT=Verdana, Helvetica, Arial]Id say stick with it, an old friend had 10 houses in Yorkshire at the time (1980) he bough them worth about 10k+ each he was just a plumber, he and the wife kept them going then the recession hit in the 80's properties fell off the wall (same as happened in Ireland now).. the banks closed in on him gave him not time and took them all back.. had they gave him 2 years paying as much as he could he would now own 10 properties worth 140k upwards banks would have go there money. He has a nice house in a nice village but now about 60 and him and the wife will have to work on, I think until the end...

you are lucky with a secure job, and pension.

Keep them, work at it, when you are 60 you will appreciate the sacrifice you made at this time, and the next 5 years will feel like nothing when your 60.. do it while you can while your young.

Id say you need to look at some other way of making an income OUTSIDE OF PROPERTY a few hundred a month when the interest rates go up in 12 months, will keep you going a lot longer. Maybe find a partner with a good job! ( I assume you havent got one)

Can you go interest only on all the loans, put the money aside for when interest rates go up, have the money to spend then and WHEN the property market gets back on its feet look at selling one or two of your assets and diversifying.
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bluemac said:
[FONT=Verdana, Helvetica, Arial]Id say stick with it, an old friend had 10 houses in Yorkshire at the time (1980) he bough them worth about 10k+ each he was just a plumber, he and the wife kept them going then the recession hit in the 80's properties fell off the wall (same as happened in Ireland now).. the banks closed in on him gave him not time and took them all back.. had they gave him 2 years paying as much as he could he would now own 10 properties worth 140k upwards banks would have go there money. He has a nice house in a nice village but now about 60 and him and the wife will have to work on, I think until the end... [/FONT]

[FONT=Verdana, Helvetica, Arial]you are lucky with a secure job, and pension.[/FONT]

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bluemac said:
Keep them, work at it, when you are 60 you will appreciate the sacrifice you made at this time, and the next 5 years will feel like nothing when your 60.. do it while you can while your young.
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This goes against your opening statement in connection with the banks taking over the couples properties. Its difficult to compare house prices from the 1980's to house prices now, I would assume that the ratio of house price to salary rates for both 1980's & now would not be similar.[/FONT]

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bluemac said:
Id say you need to look at some other way of making an income OUTSIDE OF PROPERTY[/FONT]
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Who says property is making the OP an income, as far as I see it the OP is making a loss.

bluemac said:
[FONT=Verdana, Helvetica, Arial]Can you go interest only on all the loans, put the money aside for when interest rates go up, have the money to spend then and WHEN the property market gets back on its feet
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Is this such a good idea[/FONT]
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bluemac said:
look at selling one or two of your assets and diversifying.[/FONT]
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Perhaps this should be done now, say , within one year sell the 2 properties in the north, has the OP any idea what their value is at present? Alternatively cut all your ties with your partners & sell those 2 properties.

Peoples lives & circumstances will change (get married, kids,even divorce) you may find your partners are cordial now bu that may change too.
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Carolina said:
Answer: sell up. pay off debts. put money in safe boring investment that make a +ve return. Buy a car. Live a little. Learn something new.

You will need to find out how to extricate yourself from your partner arrangements. Have you even got legal agreements to cover your exit strategy? If in negative equity, there is no exit of course.
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Very good points above.

What is the situation with your two partners?

Have they ever thought about selling or even talked to you about selling?

Have they also got a property portifolio similar to yourselve?

Are they financially secure?

Are their jobs secure for the foreseeable future?

What is their life situation, married, single etc?

What if you were told by one of your partners that he could not contribute any further on his side of the repayments, due to illness, loss of job etc?
 
To answer some of your questions...
Both partners are in secure employment.
Partner A (who co-owns a property in ROI and one in the North with me) will not be in a position to buy independently for a while and seems committed to keeping the investment properties on the go.
Partner B is engaged and is getting married mid 2010, but plans to keep the inv. property going as a sideline.
Property values mentioned are fairly accurate and up-to-date. Makes painful enough reading though!
Thanks for all the discussion BTW.
 
I would sell investment property 2 which you own on your own as it is performing poorly and it's 85% value to mortgage ratio. Then with the profit pay off your highest interest rate loans first. Use the spare cash you free up (the money subsidising the mortgage on this property) as quickly as possible on repaying the other loans. Aim for no loans. Next buy out your partners one by one. You need to fix your interest rates as you will be crippled if interest rates rise (I think they will) and rents decrease (I think they will). I personally don't agree with interest only mortgages for investment property. I also think that the 75% mortgage relief may go down in the next budget and the property tax will go up.

Have you considered what will happen if property falls any further?

Where did you get the valuations from?

Your first property is not your home. You have no home and 5 investment properties.

Very, very messy with partners etc.

It would be easier to give advice if you did the sums in one currency and also did the mortgage terms. You have very little leeway here and you're tied with 2 different people on 3 properties. Too much can go wrong.
 
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